Ever have someone make you a promise? How about a promise to leave you property after they die, if only you take care of them while they are alive? That can be a good deal, or a terrible deal when the person making the promise fails to ever create a Will naming you as a beneficiary. In this video, Stewart Albertson discusses whether you can enforce a promise to leave you property in a California Will.
If you are the beneficiary of a California Will, there’s a few things you need to know in order to understand and protect your rights. Here’s the Top 10 things you must know as a Will Beneficiary:
1. The Last Will Controls
Sometimes people create more than one Will. Under California law, the last Will made usually wins. But that depends on whether the decedent had the capacity to create a Will and was not subject to undue influence. The key is to find the last Will created. And it must be an original.
2. Executor’s Attorney is not Your Attorney
This may sound strange if you are not used to this process, but even though the executor’s attorney is paid from the estate (essentially paid from your assets) that attorney is NOT your attorney. The executor (or administrator if its an intestate estate) has the right to hire an attorney and that attorney advises the executor ONLY. Want your own legal advice? That’s fine, but you will have to hire and pay for your own independent lawyer. Welcome to probate!
3. The Empty Will Syndrome
You are named as a beneficiary under a Will, so what? A Will only controls assets that pass through the probate process. In todays complicated world, there’s precious little that passes through probate. Joint tenancy accounts or real property, life insurance, retirement account, trust interests, paid-on-death or transfer-on-death accounts all pass outside of probate. That means the Will does NOT control those assets. If there are no assets that pass through probate, then you (as a Will beneficiary) are a beneficiary of nothing. Congratulations, don’t spend it all in one place!
4. A Will is not a Will until a Court will call it a Will
So you think you have a Will? The court will be the judge of that. In California (and most places throughout the U.S.) Wills must be “admitted” to probate. Probate comes from a Latin word meaning to prove. The beginning of the probate process is meant to prove the Will is, in fact, a valid and enforceable Will. In admitting a Will to probate, the Court is essentially finding the Will to be a valid documents—in other words, the Will was proven to be a true Will.
5. Know your Bonds
The default rule in probate is that every executor or administrator is required to obtain a surety bond. A bond is not insurance, not exactly. A bond provides a source of funds that is paid out to the probate estate in the event the executor or administrator breaches a fiduciary duty. But a bond does not automatically pay out once an executor breaches a duty—quite the contrary. Most bond companies will enter the matter and fight in favor of the executor’s actions if a breach of duty is raised. If a Will beneficiary prevails, then the Court can order payment to the estate by the bonding company, and the bond company then has the right to sue the executor to recover payment.
Bonds are good and important to protect the interests of a beneficiary. But most Wills have a provision that waives bond, which the Court will do if the Will allows it. Also, the beneficiaries as a group can waive bond, assuming all beneficiaries agree to do so. The bond does cost the estate in the form of a bond premium. But it usually is a small price to pay for the protection a bond provides.
6. Inventory and Appraisals
All probate estate assets MUST be inventoried and appraised by a probate appraiser (sometimes called the probate referee) assigned to your probate case. The only thing that is not appraised by the probate referee is cash. It does not matter that you have your own appraisal or you have an appraiser you want to use. The probate referee is the only one who can appraise your estate assets.
However, there are times when a probate referee will use an independent appraiser’s information to assemble an appraisal. This typically happens with unique items that are outside the probate referee’s area of expertise, such as appraisal of race horses. But most estate don’t have race horses, so be prepared to work with the probate referee assigned to your case by the court.
7. Creditors Claims
The primary purpose of the probate process is to protect creditors. There is a mandatory waiting period of 120 days after the estate is opened (and Letters are issued) during which creditors are allowed to make claims against the estate assets. And creditor’s claims take precedence over any rights of the beneficiaries. In fact, every executor is required to notify all known creditors and provide them with a copy of the claim form (to make it as easy as possible for the creditor’s to submit a claim to probate).
8. Reports and Accounting
If you have a probate estate that does not require an estate tax return to be filed (which means your estate is worth less than $5 million—most are), then your executor must either close the estate or file a report within 12 months of the estate being opened. If an estate tax return is due, then the deadline is 18 months. Reports allow the probate court to review what is occurring in the estate and ensure nothing is amiss while the estate waits to close. As a beneficiary, you have the right to object to the report if it contains anything to which you disagree.
9. Court Order required for distribution
You cannot receive any assets from the estate until a court order is issued. It does not matter than you are a beneficiary and entitled to the assets, the property does not legally belong to you yet. It belongs to the estate and it remains an asset of the estate (and in the executor’s possession) until a court orders the property to be distributed. Frustrating, I know, but that’s the rule.
10. Executor Fees, Attorneys Fees and Costs
We all love fees (being paid them, not having to pay them). Fees are a necessary part of the probate process. In probate, there are two categories of fees you need to know about, statutory fees and extraordinary fees.
Financial elder abuse in California is become more commonplace with our aging population. In California, there are laws that are meant to protect the physical and financial well being of seniors. In this video, Stewart Albertson discusses the four basic facts required under California law to bring a financial elder abuse claim.
If you are an Executor in California, there are a few things you must know if you hope to do your job the right way. Here’s our top ten list for every California Executor:
1. You have no powers or duties until the court appoints you as Executor
You may be named as an Executor under a Will, but you really are just a suggested Executor until the court appoints you as Executor. That means you have to file a Petition for Probate with the court, receive a court order appointing you, and then have Letters Testamentary issued. The Letters Testamentary are what actually give you the legal authority to act as Executor. Once you have Letters, you can start collecting the assets and accounts of the decedent.
2. You Must Inventory and Appraise the Estate
You may know exactly what the assets of the estate are worth, but you have a legal duty to have the court-appointed probate appraiser give you an appraisal for all assets (other than cash). Even puclicly traded stocks must be appraised by the probate appraiser. There is a judicial council form created for this purpose that must be used, and you only have 120 days in which to file the completed appraisal with the court–the sooner you get started, the better.
3. Probate is all about the Creditors
You may be surprised to learn that the number one reason we have probate is to protect creditors and make sure creditors are paid. That’s why you have a duty to serve notice of the probate on all known creditors and you MUST send them a copy of the creditor claim form that they can use to submit their claim to probate. In other words, not only must you notify creditors, but you have to make it as easy as possible for them to file a claim against an estate.
4. No Distributions Without Court Order
You cannot, under any circumstances, distribute probate assets to a beneficiary without first obtaining a court order authorizing you to do so. It does not matter if a beneficiary is suffering a hardship, or if they are the only beneficiary of the estate and will receive the assets eventually, a court order is required.
5. No Fees without Court Order
The same is true for your fees and the fees for the estate’s attorney. No fees whatsoever can be paid without first obtaining court approval for payment.
6. Full Powers Are a Must
Technically, in California all actions you take as an Executor require Court approval, especially selling real estate. However, when you first petition the court to act as Executor, you can ask for full powers under the Independent Administration of Estates Act. Full powers allow you to do things like sell real property without first obtaining court approval. So try to obtain full powers whenever possible, especially if you have real property as part of your estate.
7. Know Your Way Around a Bond
Many estates require you to be bonded as an Executor. A bond ensures that there are assets to pay to beneficiaries if you screw up as Executor. However, a bond is not insurance. If you do something wrong that costs the estate money, then the bond will pay the estate, but then the bonding company will turn around and sue you to recover its money. That means you should fully understand what you are getting yourself into when becoming an executor and agreeing to be bonded.
8. Reports and Accoutning
If you are able to wrap the estate up in 12 months, then you can file your final report and accounting all at once and obtain a final order to distribute the estate assets and pay your fees. If, however, the estate remains open for longer than 12 months, then you are required to file a report with the court. A probate report is simply an update on what is happening with the estate. As part of the report you can even ask for a preliminary distribution or a partial payment of fees. But the report, as with just about every court filing, comes with a hefty filing fee, so it is usually best to get the entire estate wrapped up at one time.
9. Final Discharge
Once the court approves your final report and accounting, you are not off the hook yet. You have to make the distributions out to beneficiaries and have them sign receipts for the assets, which must then be filed with the court. You also have to file an ex-parte application for discharge. Once the court approves your discharge as Executor, then the process is complete. But if you fail to file the receipt and ask for discharge, then you are still on the hook with the court for the estate assets. Don’t forget to obtain your discharge before its too late.
10. Learn Your Duties
Executors have a ton of duties and obligations they must fulfill. Do yourself a favor and learn as much as you can about your duties and obligations because whether you know them or not, you will be on the hook for any breach of duty you undertake.
Ever wonder who has the legal right to control your remains after you die? I have never thought about it either, but it came to light last year with Casey Kasem’s body went missing. Where did it go and who has the right to control it? Believe it or not, there are rules for that. In this video, Keith Davidson describes the rules on who controls your remains.
Have to share this, our new video that describes how we feel about standing, fighting and winning for our clients. Trust and Will lawsuits are about the principal for most people, not the money. And sometimes, you have to fight for what you believe in:
Want to know how to respond to negative comments about your business on the internet? Take a page from Kevin O’Keefe, CEO and Founder of LexBlog. As you can tell from the title of this post, I had a beef with LexBlog recently (see my rant below). Mr. O’Keefe took the initiative to contact me immediately by phone, email, and replying to my tweet on the subject. He let me know what they are doing to fix the problem. And he never once asked me to remove this post.
I thought about deleting it after talking to Kevin and being satisfied that they are working on a resolution, but then I thought the better idea would be to highlight it as a learning experience. In todays connected world, there will be times in everyone’s business when customer complaints hit the social networks. People get frustrated, they feel as though their problem is not addressed, so they turn to the only outlet left…complaining to social media. It will happen to all of us. The test then for every business is how you respond. And Kevin O’Keefe responded directly and honestly. In the end that is what we all want, to be heard.
We all understand that problems arise from time to time. But we want to know people hear us and care about us enough to address the problem. After all, we are in a service business, so serving must come first in everything we do.
Thank you LexBlog for hearing me.
My Original Rant:
This blog, which we post to weekly, is hosted and supported by a company called LexBlog. I love LexBlog, they have been a great platform on which to spread education on the topics I love most: Trust and Will disputes. I have been a valued LexBlog client for over four years, and yet at the moment I hate them. Why?
I view my internet services, such as LexBlog, the same way you should view your lawyers: they just work. Don’t explain the technical stuff to me, that’s your job. Just let me do my thing and I will trust that you will (1) keep my best interests in mind, (2) don’t do anything to harm me, and (3) let me know when you need a decision or input from me.
So this past week LexBlog did a major update to their platform. I have no idea why, and I don’t want to know why. I just want this service to work. It does not. I went to the trouble of podcasting my blog posts so people would have a choice to either read my articles or listen to them (or both). LexBlog told me to use Podbean to host by podcasts, I did so. LexBlog told me I could embed by podcasts, I did so. LexBlog does an update to its system and I can no longer (1) embed by podcasts, and (2) I am told not to use Podbean any more. Grrrr. Frustration at its finest.
So this makes me think of some of the horror stories I hear from people about their lawyers. People look to lawyers for advice, they look to lawyers for directions, they look to lawyers for comfort, and then what you are told turns out to be false. Or worse yet, your lawyer tells you not to do something you were previously told to do. Grrr. The frustration starts.
But all is not lost. It starts with good communication. If I am going to change course on a legal matter, which does have to happen at times based on what facts or evidence are discovered, then it is incumbent on me to communicate the problem and new direction to my client. Just like changing a platform that makes it impossible to use Podbean should be communicated to me. Preferably BEFORE the change occurs so I am prepared for the eventual outcome.
More importantly, if a change occurs on a client’s case, it is incumbent on me to provide whatever guidance and support for that change that I can. It may be easy for me to see the solution to the change, but I have the benefit of understanding the technical side of the law–a perspective not shared by my client. And clients should not be expected to know the technicalities. Instead, it is my job to explain the way out. It may not be an easy solution or welcome news, but it is still my job to explain it and implement it as quickly as I can.
So I now hate LexBlog just as many people end up hating their lawyers. But that does not mean I can’t get over it. With some support and guidance from either LexBlog or maybe a new company, I can get on my way and leave this frustration behind. People do not intend to be frustrating after all, it is just a by product of trying to do something better and not thinking of the consequences of those decisions. This is a good chance for me to remember how my clients may feel at times and be more conscientious about the turbulent train of litigation. With understanding and support, we can get through touch changes.
If you are the beneficiary of a California Trust, there are a few things you ought to know to help you understand and protect your rights as a Trust beneficiary. Here’s the Top 10 things you must know as a Trust beneficiary:
1. Know your Trust.
Read it and then read it again. If you don’t understand it (and who really does?) have a consult with a lawyer to go over the Trust terms. If you don’t know what your rights are, you won’t be well armed to protect those rights.
2. Know your rights as a beneficiary.
Not all beneficial interests are the same. Some beneficiaries have superior rights than others. Sometimes you are entitled to a distribution now, sometime you have to wait. You must know what your beneficial rights are as soon as possible.
3. Ask for information in writing, follow-up often.
All beneficiaries are entitled to information. Ask for as much as you want, such as copies of bank statements, checks, trustee’s fees, costs, etc. Better yet, ask for the information in writing. It does not take much to send an email or a letter listing what you want to see. It does NOT need to be sent by certified mail, just get it to the Trustee in writing as soon as you can.
4. Ask for an accounting in writing, after six months or one year.
Unlike information described in number three above, not every beneficiary is entitled to an accounting. In fact, only current income and principal beneficiaries can demand an accounting, unless the Trust specifies otherwise (and they usually don’t). If you are a current income or principal beneficiary, then you will have to wait at least six month to get an accounting. But once the time comes, request an accounting in writing. Again, you need not send anything by certified mail, just get it out in writing as soon as you can.
5. Know your income tax consequences.
The good news: most of the assets you receive by way of an inheritance are NOT subject to income tax (except for things like 401(k)’s and IRA’s which have a built in income tax when you receive them because the decedent put the money away tax free during life). The bad news: if the Trust generates income, such as from rental property or investment accounts, you may be on the hook for a portion of the income tax generated by the Trust assets regardless of whether you receive any money from the Trust. so it pays to learn what income tax consequences you can expect from your beneficial interests.
6. You have the right to question and challenge your Trustee without fear of the no-contest clause.
If you start questioning the actions of your Trustee, or you need to go to Court to enforce your rights as a beneficiary, you have nothing to fear from a Trust no-contest clause. But yet, Trustees (especially private individual Trustees) continually threaten disinheritance under a no-contest clause if their actions are challenged. Well Trustees can say what they want, it simply is not true.
7. Discretion is not absolute.
Many times a Trust will give the Trustee “discretion” to make distributions to a Trust beneficiary. While Trustee’s have wide latitude in exercising discretion, it is not absolute. That means a Trustee must act reasonably under the circumstances and make distributions when they are needed. A Trustee cannot refuse to make a distribution just for the sake of saying no.
8. Communicate often.
Wonder what’s going on with your Trust? Ask about it. Don’t get a satisfying answer? Ask again, and then follow-up with the Trustee, and then keep asking. A lack of communication is a bad thing for a beneficiary. And your Trustee has a duty under California law to communicate with you. So ask away, the earlier the better.
9. Investments matter.
Every California Trustee has a heavy burden to invest Trust assets under the rules of the Prudent Investor Rule. The rules requires Trustees to act reasonably and responsibly in investing. Trustees are not allowed to make risky investments. But not every Trustee knows or implements their duties to invest properly, so know the investment rules and ask your Trustee if he or she is following the rules.
10. Trustees are not all powerful, they have duties, obligations, and responsibilities.
The number one problem with private people acting as Trustees is that they think they can do whatever they like. The common misconception is that the Trustee is “in charge now” and can act as though they are the Trust creator. Not true. In fact, Trustee’s have far more duties and obligations than they can even imagine. But if no one informs them of their duties, then they may continue to act under this misconception, which can do a lot of damage to you as a beneficiary. Trustee’s are not all powerful, and sometimes they need to be told as much.
The one-way street of Trustee duties can be confusing to individual Trustees and to beneficiaries as well. In this video, Stewart Albertson describes some of the most important and basic Trustee duties.
Your parent dies and after grieving you wonder, where is his or her Will? Didn’t mom say she had a Will, and she mentioned something about it going equally to all the kids, but what happened to that Will?
So you call your siblings and ask about the Will. You are told that your sister has it, but she will not show it to you because you are disinherited so you are not entitled to a copy. Disinherited? How can that be, mom never mentioned anything about disinheriting you. Plus, you and mom got along so well, how could this happen? Are you even being told the truth?
You persist and demand a copy of the Will in writing. You believe you should at least see the Will before you give up and go away. Something just does not feel right. You knew you and your sister were not close, but you never imagined she would do something like this, but what has she done and how are you going to find out?
Your sister never responds or she sends you a threatening message and tells you that you will never see a cent of your mother’s assets because mom hated you. Oh really? That is the first you ever heard of mom not liking you.
Now comes a call to a lawyer. The lawyer tells you that under the California Probate Code you are entitled to a copy of your mother’s Will because you are an “heir-at-law” of your mother. Even if the Will did disinherit you, you are still entitled to a copy. Great, now how do you get that copy? That’s not as easy as it should be.
Bottom line: you must file a Petition to compel your sister to hand over the Will. In other words, there is no way for you to force your sister to hand over the Will without going to court and seeking a court order. The good news: that a relatively straightforward petition and the court will grant your request (most likely). The bad news: it costs money to hire an attorney, draft up the petition, and pay the court filing fee. But will your sister have to pay that cost? No. As ridiculous as that sounds, it is highly unlikely that your sister will have to reimburse you for your attorneys’ fees and court costs because under our system each party pays their own fees and costs.
Once you have a copy of the Will, however, then you will know for certain what your rights are and how to take the next step to assert your rights. Hang in there, it can be a frustrating process, but when you mom’s legacy is at stake, it’s worth the struggle. Or maybe it’s not worth the struggle, that’s a question only you can decide.